"Sewer Service" May Violate FDCPA, Holds New York Federal Court

"Sewer Service" May Violate FDCPA, Holds New York Federal Court

Posted on May 9, 2013 3:35pm PDT

The defendants in this case[1]:
Mel S. Harris & Associates and NCO Portfolio Management, Inc. The plaintiff sued these collection entities under the Fair Debt Collection Practices Act ("FDCPA") for 1) obtaining a default judgment based on a falsified affidavit of service; and 2) failing to return garnished money pursuant to a court order.

Denying NCO Portfolio's dismissal motion in its entirety, Judge Batts of the Southern District of New York handed good arsenal to consumers victimized by "sewer service" (intentionally failing to serve a consumer then falsifying an affidavit of service to reflect proper service). Judge Batts honored plaintiff's pro se claim that NCO fraudulently obtained a default judgment that resulted in a garnishment, ruling that "such sewer service practice, followed by obtaining a default judgment, squarely falls within the prohibited acts under the FDCPA."

The second basis of the consumer-plaintiff's complaint was NCO's failure to return – for 10 months – garnished money that was ordered to be returned by a judge. Using strained logic, NCO Portfolio argued that since a court order was not a debt, the plaintiff failed to state a claim under the FDCPA. The court quickly rejected that argument finding that the underlying debt obligation[2] is the determinative factor – not the court order. The court order was not an independent obligation. "What is dispositive in determining the applicability of the FDCPA is not the form of the obligation but whether the debt, regardless of its form, arises from a consumer transaction," the court stated.

"Defendant's ten-month refusal to comply with two Court Orders that vacated a fraudulently received judgment falls within FDCPA's broad purpose," the court held. A court could also find Defendant's conduct abusive and unfair in violation of other sections of the FDCPA.

This decision helps remediate the widespread problem of sewer service. But it still takes a lot of work for the aggrieved consumer to 1) vacate the default judgment; and 2) bring a federal case to obtain the remedy.

Also, please observe that other courts have refused to impose liability on creditors and law firms for the alleged misconduct of process servers. Many times, it is successfully argued that process servers are independent contractors over which the collectors/lawyers are not responsible.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship.